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Income Taxes
 3 Months Ended
Dec. 31, 2023
Income Tax Disclosure [Abstract]  
Income Taxes
14. Income Taxes

In calculating the provision for income taxes, Adient uses an estimate of the annual effective tax rate based upon the facts and circumstances known at each interim period. On a quarterly basis, the actual effective tax rate is adjusted, as appropriate, based on changes in facts and circumstances, if any, as compared to those forecasted at the beginning of the fiscal year and each interim period thereafter. For the three months ended December 31, 2023, Adient’s income tax expense was $20 million equating to an effective tax rate of 31%. The three month income tax expense was higher than the Irish statutory rate of 12.5% primarily due to the inability to record a tax benefit for losses in jurisdictions with valuation allowances and foreign tax rate differentials. For the three months ended December 31, 2022 Adient’s income tax expense was $31 million equating to an effective tax rate of 48%. The three month income tax expense was higher than the Irish statutory rate of 12.5% primarily due to the inability to record a tax benefit for losses in jurisdictions with valuation allowances and foreign tax rate differentials.

Valuation Allowances

As a result of the Company's first quarter fiscal 2024 analysis of the realizability of its worldwide deferred tax assets, and after considering tax planning initiatives and other positive and negative evidence, Adient determined it was more likely than not that certain deferred tax assets recorded in Luxembourg during the three months ended December 31, 2023, would not be realized and established a valuation allowance, which did not have a material impact on Adient’s consolidated financial statements.

Adient reviews the realizability of its deferred tax assets on a quarterly basis, or whenever events or changes in circumstances indicate that a review is required. In determining the requirement for a valuation allowance, the historical and projected financial results of the legal entity or combined group recording the net deferred tax asset are considered, along with any other positive or negative evidence. All of the factors that Adient considers in evaluating whether and when to establish or release all or a portion of the deferred tax asset valuation allowance involve significant judgment. Since future financial results may differ from previous estimates, periodic adjustments to Adient's valuation allowances may be necessary.

Given current earnings and anticipated future earnings at certain subsidiaries, the Company believes that there is a reasonable possibility that sufficient positive evidence may become available that would allow the release of all, or a portion of, valuation allowances at certain subsidiaries within the next twelve months. A release of valuation allowances, if any, would result in the
recognition of certain deferred tax assets which could generate a material income tax benefit for the period in which such release is recorded.

Uncertain Tax Positions

At December 31, 2023, Adient had gross tax effected unrecognized tax benefits of $537 million. If recognized, $168 million of Adient's unrecognized tax benefits would impact the effective tax rate. Total net accrued interest at December 31, 2023 was approximately $31 million (net of tax benefit). The interest and penalties accrued for the three months ended December 31, 2023 was $2 million. At December 31, 2022, Adient had gross tax effected unrecognized tax benefits of $522 million. If recognized, $122 million of Adient's unrecognized tax benefits would impact the effective tax rate. Total net accrued interest at December 31, 2022 was approximately $25 million (net of tax benefit). The interest and penalties accrued for the three months ended December 31, 2022 was $2 million. Adient recognizes interest and penalties related to unrecognized tax benefits as a component of income tax expense.